2008 Charts of the Week
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- 2nd Quarter Market Review (as of 06/30/2008)
- MarketView Chart of the Week, posted July 3, 2008
- Capital markets were down modestly in the second quarter of 2008. Bonds, as measured by the Lehman Brothers Aggregate Bond Index, posted a negative return of -1.02% for the most recent quarter but the trailing 1-year return was still a positive 7.12%. U.S. equities, represented by the S&P 500 Index and the Russell 3000 Index, posted negative returns for the second quarter and for the trailing 1-year period. International equity markets, which are often benchmarked relative to the MSCI EAFE Index, also posted negative returns of -1.93% and -10.15% over the quarter and 1-year period, respectively. For the equity markets, positive returns in the months of April and May were overshadowed by steep declines in June reflecting investors concerns over weakness in the overall economy and rising inflation.
- Home Sales: New & Existing
- MarketView Chart of the Week, posted June 27, 2008
- Two good measures of housing market health are existing and new homes sales. New homes sales are published monthly by the U.S. Census Bureau and represent a national sampling of new building activity. Existing home sales are published monthly by the National Association of Realtors and represent existing single-family home sales. The drop in home sales has been significant over the last year as existing home sales have dropped over 10% and new home sales by 40%. While both home sale groups have struggled since 2006, recent existing home sales appear to have stabilized in the near term.
- Global Interest Rates
- MarketView Chart of the Week, posted June 20, 2008
- While the U.S. Federal Reserve ("the Fed") aggressively cut the Federal Funds Target Rate in the 4th quarter of 2007 and 1st quarter of 2008, it is interesting to see that other key interest rates around the world held steady or only declined modestly over the same time period. For the 2nd quarter of 2008, these same rates have remained relatively stable. The Federal Funds Target Rate is the key interest rate used to help the Fed implement monetary policy in the U.S. If the Fed believes the economy is growing or inflation is rising too quickly they may implement a tightening policy by raising interest rates. This tightening tends to make borrowing more expensive and hopefully slows the pace of economic growth and inflation. Analysts believe world central banks are seeking further evidence on the affects of inflation concerns (e.g. record oil prices and higher food costs) before making any changes.
- Gas Prices and the Annual Costs to Consumers
- MarketView Chart of the Week, posted June 13, 2008
- The price of gasoline has risen steadily over the last few years with a significant increase in the last few months. According to motorist group AAA, the U.S. national average price of gasoline reached $4 a gallon on June 8, 2008. This increase is illustrated in the chart above with the average annual price of gasoline and the annual cost of fueling a car1. The average annual cost of fueling a car has risen over 200% since 1991 and over 20% in the last year. Note that the average annual price of gasoline for 2008 is only $3.34 which is below the current price.
- Changes to Morningstar Star Ratings Over Time
- MarketView Chart of the Week, posted June 6, 2008
- When selecting investments, it is important not to overemphasize only one factor such as the Morningstar star rating1, which focuses on past performance. Selecting investments is about future expectations rather than the past. How did today's top Morningstar rated mutual funds rate in the past? To examine this question, we researched how mutual funds rated 4 and 5 stars, as of May 31, 2008 by Morningstar, were rated five years ago (May 2003) and included only the oldest share class of funds with at least 5 years of performance in the Morningstar Large-Cap Value, Growth, and Blend categories.
- Sector Changes in the S&P 500
- MarketView Chart of the Week, posted May 30, 2008
- The S&P 500 Index is considered a proxy for the U.S. equities market. The companies that comprise the index are from different sectors and are weighted by their market capitalizations ("market cap"). Market cap is generally calculated by multiplying outstanding shares by market price. Hence the larger the company's market cap, the greater weighting or influence on the index. As specific companies or sectors of the market grow faster than the overall market, their weighting or influence on the index grows. Weighting can be measured as a percentage of the market capitalization of the entire index. The chart above compares the change in weighting of the companies within the financials and energy sectors.
- Net Equity Fund Cash Flows vs. S&P 500 Index Performance
- MarketView Chart of the Week, posted May 23, 2008
- Market timing is a difficult task in any period. In fact, a famous study by Nobel laureate, William Sharpe, stated that market timers had to be correct over 70% of the time when predicting market swings to match the returns of a passive investor. To get a perspective on the success of market timing, we examined monthly equity mutual fund net cash flows as reported by AMG Data Services and the monthly returns on the S&P 500 Index. The data indicates that many investors are buying high and selling low. The natural inclination to flee equities in times of negative performance is evidenced by the negative cash flow in January, July and September of 2001. More recently, January 2008 saw a similar occurrence. Conversely, positive cash flows to equities largely occurred in times of positive index performance; 2003 to early 2007.
- Changes in Value of the S&P 500 Index*
- MarketView Chart of the Week, posted May 16, 2008
- Securities markets go through up and down periods. Attempts to time these periods are very difficult due to the unpredictable, often short, momentum bursts. Trying to time the market by selling high and buying low is a very difficult task. It's time in the market, not timing the market that has paid off for investors. The chart above illustrates how a $50,000 investment in the S&P 500 Index weathers the ebb and flow of market cycles.
- The Cost of Losing the 10 Best Days of the S&P 500 Index
- MarketView Chart of the Week, posted May 02, 2008
- The value of long-term investing is an important principle to remember as daily market fluctuations generate short-term concerns. While the value of stocks may change suddenly at times, it is a good idea to carefully consider your portfolio and how it relates to your goals before making any changes. Making decisions based on short-term performance, or attempting to time the market could lead to poor decisions. Consider the chart above. If $10,000 were invested in the S&P 500 Index on January 1, 1980, it would be worth $131,013 on April 30, 2008. If the same investment missed the ten best performing days, it would be worth $76,581. Missing the 10 best days out of 7,150 days would result in a return worth 42% less.
- S&P 500 Index Historic Calendar Year Returns 1926-2007
- MarketView Chart of the Week, posted May 02, 2008
- The graph above shows how calendar year returns for the S&P 500 Index have ranged over the last 82 years. The blue bars represent positive calendar year returns, while the red bars represent negative calendar year returns. For the 82 years ended 12/31/2007, the S&P 500 Index posted 59 positive calendar return years and 23 negative calendar year returns. The frequency of returns are skewed to the positive side as 72% of the time the S&P 500 Index had positive return years, while 28% of the time the S&P 500 Index had negative return years. The S&P 500 Index returned an average of 21.27% over the positive years and -13.34% over the negative years. Overall, the average return for the period is 10.36%. For the returns each year, a table is provided below.
- REIT Performance vs. Equity Market Performance (as of 03/31/2008)
- MarketView Chart of the Week, posted April 25, 2008
- Real Estate Investment Trusts ("REIT") are investment vehicles with holdings generally related to the real estate markets, such as mortgages, equities in real estate related companies, shopping centers, office buildings and hotels. REIT's employ a variety of strategies and vary in their level of diversification. Historically, some investors have used REITs to obtain exposure to the real estate sector and possibly hedge against inflation. Also, REIT popularity over the last few years has been influenced by their strong performance, as measured by the S&P REIT Index, relative to the equity market, as measured by the S&P 500 Index.
- Top Ten Countries in the MSCI EAFE Index
- MarketView Chart of the Week, posted April 18, 2008
- The Morgan Stanley Capital International (MSCI) Europe, Australasia, and the Far East (EAFE) Index is a representative benchmark used to measure the performance of the international stock market as a whole. The graph above shows the performance in U.S. Dollars of the top 10 countries by weighting in the index as of March 31, 2008, with the United Kingdom having the highest weighting, Japan having the second highest, and so forth.
- S&P 500 Sector Performance (as of 03/31/08)
- MarketView Chart of the Week, posted April 1, 2008
- Individual sectors of the stock market can post good and bad years for investors. A sector can outperform over an extended period and then underperform in subsequent periods, trailing all other sectors. The graph above compares the performance of the S&P 500 Index to its ten underlying industry sectors.
- 1st Quarter Market Review (as of 03/31/2008)
- MarketView Chart of the Week, posted April 4, 2008
- Capital markets were mixed for investors in the first quarter of 2008. Bonds, as measured by the Lehman Brothers Aggregate Bond Index, rose 2.17% and 7.67% for the quarter and trailing 1-year periods, respectively. U.S. equities represented by the S&P 500 Index and the Russell 3000 Index, posted negative returns for the first quarter and for the 1-year period. International equity markets, which are often benchmarked relative to the MSCI EAFE Index, also dropped 8.82% and 2.27% over the quarter and 1-year period, respectively.
- Start Saving Early
- MarketView Chart of the Week, posted March 28, 2008
- Contributing to your retirement account early can accelerate progress toward your retirement goals. The power of compounding over just an additional 10 years can make a significant difference over time.
- Bond Spreads
Period Ending 02/29/2008 - MarketView Chart of the Week, posted March 20, 2008
- Bond yields generally reflect current interest rates plus a risk premium and are historically higher for those borrowers that have a greater probability of defaulting on their debt. For instance, a borrower such as the U.S. Treasury can attract investors with a lower yield since the U.S. Government is assumed to have no default risk. Other borrowers typically offer investors a higher yield to compensate them for the additional risk they are taking.
- Is Stagflation Back?
- MarketView Chart of the Week, posted March 14, 2008
- The term "stagflation" refers to an economy whose prices are rising while output is falling. Economists currently differ whether stagflation is where the U.S. economy is headed. As the graph illustrates, inflation as reflected in the Consumer Price Index ("CPI") has trended upward since November 2006.
- The Falling Dollar versus the Euro and the Price of Gold
- MarketView Chart of the Week, posted March 7, 2008
- The U.S. Dollar has fallen in value against several major world currencies over the last year. For example against the Euro, the U.S. Dollar is down 14% as one U.S. Dollar can only buy 0.66 Euros as of March 5, 2008 which is down from 0.76 Euros on March 6, 2007.
- Home Price Index vs. Consumer Confidence
- MarketView Chart of the Week, posted February 29, 2008
- Throughout the recently ended real estate boom, economists purported consumers had buoyed their balance sheets with rising home values. The recent housing downturn may be exerting pressure on consumer's bottom-line and lowering their confidence in the U.S. economy. The chart above illustrates the changes in housing values and consumer confidence as represented by their respective indices. The S&P/Case-Shiller U.S. National Home Price Index is a broad, market value-weighted composite of single family home price indices for the nine U.S. Census divisions and is calculated quarterly. The Conference Board Consumer Confidence Index measures the level of confidence individual households have in the performance of the economy.
- National Average Regular Unleaded Gasoline Prices
- MarketView Chart of the Week, posted February 22, 2008
- In recent weeks the national average price of gasoline has risen close to its May 2007 highs of $3.22. Despite the rising prices, several factors are keeping prices from going even higher. Consumers are decreasing their consumption as the economy slows down. The decrease in consumption has lead to an increase in inventory which puts downward pressure on prices. This downward pressure is dampening the effects of higher per barrel crude oil prices. For now, the results are higher gas prices. It remains to be seen whether the slowing economy will have a lasting effect on demand and gas prices.
- Reduction of Risk Over Time
- MarketView Chart of the Week, posted February 08, 2008
- The above chart shows the S&P 500 Index's range of returns for various time horizons since 1926. An investment matching the performance of the Index held for a one-year period ranged from a 163% gain from July 1932 to June 1933 to a 68% loss from July 1931 to June 1932. However, holding the same investment for twenty years returned as much as 18% per year from April 1981 to March 2000 and never less than 1% from September 1930 to August 1949. It's important for investors to remember the market may fluctuate in the short-run, but returns tend to stabilize in the long-run.
- Currency Impact: Local Currency vs. U.S. Dollar
(One-year ended January 31, 2008) - MarketView Chart of the Week, posted February 08, 2008
- International investing involves many risks including the risk that foreign currency exchange rates change relative to the U.S. dollar. A weakening dollar, compared with local currencies, can bolster returns as we have seen with many countries for the year ended January 31, 2008. On the other hand a strengthening dollar, compared with local currencies, can have the inverse effect of taking away from return.
- Value Versus Growth Monthly Returns
- MarketView Chart of the Week, posted February 01, 2008
- It is often debated whether higher stock market returns can be achieved by investing in stocks labeled as "growth" or "value". Historically, those seeking to invest in value stocks search for undervalued companies with relatively low price-to-earnings (P/E) ratios and high dividend yields. On the other hand, those investing in growth stocks search for companies with high earnings growth that tend to sell at higher P/E ratios with low dividend yields.
- Market Volatility
- MarketView Chart of the Week, posted January 25, 2008
- Volatility in the stock market, as measured by the Chicago Board of Options Exchange VIX Index, has increased over the past year. Tuesday's VIX Index closing price came close to the multiyear high of 31.09 set on November 13, 2007. The VIX Index is a commonly used measure of the market's expectation of volatility and risk over the next 30-day period. A high VIX Index level is generally associated with a period of increased volatility and uncertainty in the market, while a lower level corresponds to less volatility and stress in the market.
- Top Ten Countries in the MSCI EAFE Index
- MarketView Chart of the Week, posted January 18, 2008
- The Morgan Stanley Capital International (MSCI) Europe, Australasia, and the Far East (EAFE) Index is a representative benchmark used to measure the performance of the international stock market as a whole, in U.S. dollar terms. The graph above shows the performance of the top 10 countries by weighting in the index as of December 31, 2007, with the United Kingdom having the highest weighting, Japan having the second highest, and so forth.
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